[star]The American Mind[star]

June 26, 2006

Critics Gloss Over Wal-Mart's Cheap Prices

Jason Furman, a self-professed progressive [PDF] who "instinctively recoil[s] at the big-box shopping centers spreading their uniformity across the American landscape" sees the benefits of Wal-Mart:

A range of studies has found that Wal-Mart's prices are 8 percent to 39 percent below the prices of its competitors. The single most careful economic study, co-authored by the well-respected MIT economist Jerry Hausman, found that grocery sales by Wal-Mart and other big-box stores made consumers better off to the tune of 25 percent of food consumption. That doesn't mean much for those of us in the top fifth of the income distribution—we spend only about 3.5 percent of our income on food at home and, at least in my case, most of that shopping is done at high-priced supermarkets like Whole Foods. But that's a huge savings for households in the bottom quintile, which, on average, spend 26 percent of their income on food. In fact, it is equivalent to a 6.5 percent boost in household income—unless the family lives in New York City or one of the other places that have successfully kept Wal-Mart and its ilk away.

So on the matter of price Wal-Mart is good. Of course price isn't the only concern to a consumer. The retail monster is not known for customer service and there are a number of goods and brands that aren't available in their stores because they refuse to deal with Wal-Mart's tough negotiators. Wal-Mart isn't perfect, but even it's biggest cheerleaders wouldn't claim that. The free market allows an assortment of business models from price-focused chains like Wal-Mart to those that emphasise quality, service, atmosphere, and aethetics like Crate & Barrel.

Furman is surprised "by how quickly Wal-Mart's critics move past the issue of low prices?" They move pass that fact because deep down Wal-Mart's critics are anti-capitalist, anti-freedom. They get a strange, negative reaction knowing someone is making a profit. James Joyner puts this view into one sentence: "The thing to keep in mind, however, is that the people who own Wal-Mart make a lot of money, and they are therefore evil." The anti-capitalists view the economy as a zero-sum game where Wal-Mart's profit is derived directly from the low-wage serfs who work in the stores (voluntarily I might add). It's not true, but it helps power their crusade against an American success story.

"Is Wal-Mart Good for the American Working Class?"

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Posted by Sean Hackbarth in Economics at 04:03 PM | Comments (9) | Trackbacks (0)